Exxon, Chevron fourth-quarter profits lifted by U.S. shale gains

HOUSTON (Reuters) - Exxon Mobil Corp and Chevron Corp, two of the world’s largest oil producers, on Friday posted improved quarterly earnings that benefited from double-digit percentage increases in production from the top U.S. shale field.

The two U.S. oil majors missed the first stage of the shale boom in the Permian Basin of West Texas and New Mexico and have been investing billions of dollars to make up for lost time. They are betting their size and other businesses offer advantages smaller producers cannot duplicate.

Combined, the two companies pumped 677,000 barrels of oil and gas per day in the shale field last quarter, close to a fifth of the region’s total oil production, according to figures released on Friday.

Exxon said its fourth-quarter Permian production was 300,000 barrels of oil and gas per day, up 93 percent from a year ago and up 12 percent over the third quarter. Chevron’s output in the Permian jumped to 377,000 barrels per day, up 84 percent from the same period a year earlier.

“In just two years we have doubled our rig count, increased our resource base, decreased unit development and operating costs, and more than doubled our production,” Chevron Chief Executive Officer Michael Wirth said on an earnings call.

Both companies are tying their shale operations to logistics and refining arms that independents do not have.

“We’re going to be advantaged versus the rest of industry,” Exxon CEO Darren Woods said on an earnings call, noting the company’s close coupling of pipeline, logistics and oil refining operations to shale.

In nine of the previous 10 quarters Exxon’s overall oil and gas output dropped, but its fourth-quarter production edged up to just over 4 million barrels of oil equivalent per day, from 3.9 million in the year-ago period.

Production at Exxon, the nation’s largest oil and gas producer, was “very strong,” said Brian Youngberg, an analyst with Edward Jones.

The Permian, now producing 3.85 million barrels per day, is forecast to generate 5.4 million barrels per day by 2023, greater than any single OPEC member other than Saudi Arabia, according to consultancy IHS Markit.

Shale fields’ fast payoff is lifting both companies’ earnings and cash flow. Chevron generated $9.2 billion in cash flow from operations in the fourth quarter, up from $8.0 billion a year earlier. Its 2019 capital spending budget is going toward projects that can deliver cash within two years, Wirth said.

Exxon, in addition to shale, continues to invest heavily in major refining, chemical and offshore projects.

That has not sat well with some investors. Its stock is off 13 percent in the 12 months ended Jan. 31. Exxon is the only international oil company “not currently repurchasing shares,” Simmons Energy said in a note.

FILE PHOTO - A security guard sits behind a security fence at a gate leading into the ExxonMobil PNG Limited operated Liquefied Natural Gas (LNG) plant at Caution Bay, located on the outskirts of Port Moresby, Papua New Guinea, November 19, 2018. REUTERS/David Gray

Exxon shares were up 3.03 percent at $75.50 in afternoon trading, and Chevron shares were up 3.04 percent at $118.13.

Exxon’s fourth-quarter net income fell to $6 billion, or $1.41 a share, from $8.38 billion a year ago, when results benefited substantially from the impact of U.S. tax reform. Excluding the impacts of tax reform and asset impairments, earnings rose to $6.4 billion from $3.73 billion a year ago.

Chevron reported a quarterly profit of $3.7 billion, or $1.95 per share, compared with $3.11 billion, or $1.64 a share, a year earlier.